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What's next for AT&T megadeal? A look back at Comcast-NBC

By Tali Arbel AP Technology Writer

Updated:
10/24/2016 10:10:40 PM EDT

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A statue of Christopher Columbus stands between the towers of the Time Warner building, Monday, Oct. 24, 2016, in New York. AT&amp;T plans to buy Time Warner for $85.4 billion. (AP Photo/Mark Lennihan)

NEW YORK (AP) — AT&T is following in the footsteps of its rival Comcast in snapping up its own entertainment conglomerate — in this case, Time Warner. But what's happened in the aftermath of Comcast's 2011 purchase of NBCUniversal may cast a shadow over AT&T's deal.

Like that earlier transaction, the $85.4 billion combination of AT&T and Time Warner would create a giant new company that not only produces movies, TV shows and sports and news programming but also delivers them to viewers.

Time Warner owns popular channels like HBO, CNN, TNT and TBS, plus Warner Bros. movies such as the Harry Potter and DC Comics superhero franchises, while AT&T has its mobile network and its DirecTV service.

AT&T says it is looking for ways to provide innovative new services, which means leveraging Time Warner's offerings to attract customers, analysts say. But doing so might easily limit consumer choice should AT&T decide, for instance, to withhold certain shows from its rivals or to grant better access to AT&T customers.

Because AT&T is effectively buying one of its suppliers, not a rival, the deal doesn't directly limit competition, and the company argues that regulators should approve it, possibly with conditions to protect consumers. That's what happened in the case of Comcast and NBC.

But such conditions leave lots of room for interpretation and can be difficult to enforce. They're also usually stamped with an expiration date.

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So for a glimpse of what the future might hold for AT&T and Time Warner, a look back at the Comcast-NBC merger can be instructive.

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IN COMCAST'S SHADOW

Many of the government's restrictions were designed to prevent Comcast, a giant cable company and internet-service provider, from favoring its own video offerings over those from online TV rivals like Netflix or, on the other hand, keeping its programming from other cable or satellite TV companies.

Comcast says that since 2011, there has been only one violation of the more than 150 federal conditions placed on its deal for NBC. The conditions expire in 2018.

But those conditions have been problematic, public interest groups and some competitors said last year during Comcast's aborted attempt to acquire Time Warner Cable.

"These sorts of behavioral conditions are very hard to write, very hard to enforce and don't necessarily always give you the precise outcome you were looking for," said John Bergmayer, senior staff attorney at public interest group Public Knowledge, which generally opposes media consolidation as harmful to consumers.

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LOOKING AT DISPUTES

For instance:

— Under the conditions set by the government, if Comcast puts news channels near each other on the TV lineup, it must include competitors' channels in the same "neighborhood." But Bloomberg said Comcast unfairly placed Bloomberg TV far away from other popular news and business networks, like Comcast's own CNBC. The Federal Communications Commission agreed with Bloomberg.

— Comcast was required to provide broadband-only subscriptions that weren't bundled with phone or cable service, so that people could sign up for internet and get any TV they wanted from online alternatives like Amazon or Hulu. In 2012, Comcast was fined $800,000 for not doing enough to let customers know they could do this.

— Comcast was also forced to treat all internet traffic on its network equally, a version of the government's "net neutrality " rules designed, for instance, to make sure network owners like Comcast and AT&T don't put their own video programming in the internet fast lane while relegating rivals to the slow lane.

In March, Public Knowledge complained that Comcast was violating that condition by allowing users to stream a Comcast service called Stream TV without it counting against their data caps. Comcast said this is allowable, part because Stream TV is a box-free cable service that isn't subject to internet traffic rules. The FCC is looking into such issues.

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ASSUAGING REGULATORS

AT&T is trying to spin its deal as consumer-friendly.

While the company says that adding Time Warner will help it "differentiate" its service — which suggests some kind of exclusive or special stuff — it also says it plans to keep Time Warner's model of "distributing its content as widely as possible."

Regulators would probably not want AT&T to keep Time Warner's movies, shows and sports from competitors (which would also leave consumers with fewer options). As with Comcast, the concern is that AT&T will favor its own video.

There are subtle ways to accomplish this, however. For example, AT&T could make its own video more attractive to customers by letting them watch it on their cellphones without using up the data they pay AT&T for.

In hopes of persuading regulators to approve the deal, the company also says that the new combined business will be an attractive option for advertisers, giving more competition to Facebook and Google, and that buying Time Warner could help accelerate the push toward 5G wireless service.

Rolling out 5G, a faster mobile technology that could introduce more competition for cable companies, is important to the FCC.

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